Centralized buying at Whole Foods goes directly against its ethos

Why is Whole Foods doing this? Reports began soon after Amazon’s 2017 acquisition that the grocer was accelerating an already ongoing shift to centralize buying in order to ensure a balanced mix of major and niche brands across stores. 

Amazon’s physical store sales, primarily generated by Whole Foods, have declined in four consecutive quarters, including a 15.5% decline in Q1. The poor in-store performance has been partially offset by online sale, which tripled at Whole Foods from March to December of last year. 

According to last week’s statement, Whole Foods “continues to grow across all channels, including delivery, pickup and in-store.” The move, according to the company, will allow regional operations to “focus exclusively” on running their businesses, including e-commerce and store support. 

Is it a good move? One of the things that has made Whole Foods so successful is its willingness to work with undiscovered brands. Whole Foods has been the gateway to grocery retail for many years, and that connection was built through regional buyers discovering them through farmers markets, events and other local connections. Allowing brands to sell to individual stores or regions was often touted as the way Whole Foods discovered and supported emerging and local brands. And it’s how local brands stopped being local brands. 

The question becomes: Can centralized buying support local brands? Can this be done in a way that works logistically while still supporting local product sourcing and without raising prices to compensate for the extra costs? It could just be me, but it seems that centralized buying and local product discovery are polar opposites. How can Whole Foods centralize buying and get better at the local level? 

There are obvious benefits to centralized sourcing, including lower costs and potentially higher quality control, but Whole Foods quality standards are already best in class and shoppers don’t venture there for low costs. Sure, lower prices were the No. 1 thing everyone expected from an Amazon’d Whole Foods, and that has come to fruition marginally. “But prices were so high to start that it’s still one of the most expensive chains out there,” even on national brand items also sold by competitors, reported Saunders.  

Is it worth giving up agility, localization and customer discovery for higher margins? Depending on what Amazon sees in Whole Foods’ future, it seems so. Lee Peterson, EVP at strategy consultancy WD Partners, said in a RetailWire discussion that he is convinced Amazon believes all grocery sales will be online in 10 years. “Half the shelves are empty, the whole front of the store is a warehouse, the cafe is closed and there are more pickers in the store than customers. Does that sound like they care about the old ‘in-store experience’ factor? There are huge signs when you check out reading “2 Hour Delivery!” in Amazon blue. The writing is literally on the wall.”

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